The market commenced the week on a positive note as the IMF Board approved the USD 1bn disbursement. Additionally, the Economic Coordination Committee (ECC) approved the much awaited Textile Policy after incorporating certain changes. However, the market corrected midweek as oil prices crossed USD 90/bbl. for the first time since 2014. Furthermore, Pakistan’s fiscal deficit contracted 2.1% (PKR1.37trn) during 1HCY21. The market closed at 46,079 points, gaining 170 points (+0.4%) WoW.
Sector-wise positive contributions came from i) Fertilizers (159pts), ii) Automobile Assembler (55pts), iii) Oil & Gas Exploration Companies (40pts), iv) Commercial Banks (38pts), and v) Power Generation & Distribution (34pts). Whereas, sectors which contributed negatively were i) Technology & Communication (66pts), ii) Cement (49pts), iii) Oil & Gas Marketing Companies (45pts, iv) Insurance (36pts) and Cable & Electrical Goods (20pts). Scrip-wise positive contributors were ENGRO (86pts), DAWH (61pts), MEBL (59pts), EPCL (34pts) and FFC (33pts). Meanwhile, scrip-wise negative contribution came from PSO (39pts), AICL (35pts), SYS (33pts), MCB (21pts) and PAEL (20pts).
Foreign selling continued this week, clocking-in at USD 5.9mn compared to a net sell of USD 4.4mn last week. Major selling was witnessed in Technology (USD 3.2mn) and All other sectors (USD 1.6mn). On the local front, buying was reported by Other Organizations (USD 11.1mn) followed by Individuals (USD 3.1mn). Average volumes clocked-in at 207mn shares (down by 28% WoW) while average value traded settled at USD 46mn (down by 16% WoW).
Other major news: i) IMF says Pakistan’s external debt to reach $138.568bn in 2022-23, ii) Govt seeks a way to reduce WHT for Chinese IPPs iii) Payment to power plants, iv) DAP use declines by over 17 percent in Rabi season v) Low-cost housing scheme to be introduced vi) RSEZ: Chinese investors want more incentives, still a strategic partner, reaffirms US.
Outlook and Recommendation
We expect the market to remain positive in the upcoming week. With the continuation of a strong result season, certain sectors and scrips are expected to stay under limelight. Our preferred stocks are OGDC, PPL, MARI, HBL, MCB, UBL, MEBL, FABL, LUCK, FCCL, ENGRO, FFC, HUBC, PSO, INDU, ILP, EPCL, and ASTL. The KSE-100 is currently trading at a PER of 5.1x (2022) compared to Asia Pac regional average of 13.9x while offering a dividend yield of ~8.5% versus ~2.3% offered by the region.
Courtesy – AHL Research